It is increasingly noticed that the current patent system generates
problems and sometimes even absurd side-effects that were not anticipated
nor intended when the system was set up. Apparently, these aberrations
are not yet widely acknowledged in the public nor well understood, in part
because such arcane legal issues seem far removed from everyday life, and
because the interactions between technological progress, economic prosperity,
and the legal frameworks governing both are complex and broad.
Affected the most are primarily fast-paced technology arenas such as software
and biotechnology, fields that are involved with information processing
in the most general sense, which can give rise to fluid and rapid progress,
because earlier concepts can be reused effectively as building blocks of
later and even more powerful, aggregate concepts.

What follows is an outline of some of the problems and the spectrum
of positions taken by various parties. Then, an attempt is made
to extrapolate into the future a bit in four scenarios, to see what
the world might look like under different patent regimes, ranging from
no patents at all to much more severe restrictions than today.
If these scenarios are accurate in their implications, they could help
us define which future we might find desireable and acceptable to live
in, which will hopefully encourage us enough to take appropriate steps
towards implementing and shaping the corresponding legal landscape.

What are some of the problems ?

The most visible manifestation of the patent problem is in form
of high profile litigation, which often involves patents of
questionable novelty and originality. Despite the triviality of
some the proclaimed "inventions", the dollar amounts involved are
sometimes very substantial, with $100 million not unheard of.
The stakes in such law suites are very high, and by their
precedent-setting nature, they can threaten to change business practices in entire
industries (example: the Amazon 1-click patent).
Companies involved in such battles pay for the costs of penalties and
legal fees, but ultimately these costs are of course passed on to
the consumers, almost none of which are aware of this additional
"patent tax" they are paying. The only party that always makes a
fat profit in this system are the patent attorneys, no matter which
way the law suits are decided.

From a general point of view, the core problem seems to be the fact
that in today's technology dominated world, there is so much
innovation happening simultaneously all around us, that almost
certainly very similar ideas, and even exactly the same ones, can
become apparent to several individuals at about the same time, even
though these might have been genuinely independent research
efforts. It seems extremely unfair if only one party gets to
have monopoly power over such ideas that lie in the air, solely
because they filed with the patent office a day earlier than the other
co-inventors. If the concept of "property" is supposed to mean
anything at all, then it should be especially the case that people are
able to earn the fruits of their labor by utilizing their most closely
held property, namely their own body and especially their brain. If an
engineer comes up with a neat solution to a vexing problem, the
engineer should be allowed to use and commercialize this solution,
which could be labelled with the loaded term "invention", regardless
of whether other brains elsewhere on the planet came up with the same
solution, and regardless of whether at the same time, earlier or
later. After all, the solution is the result of genuine effort and
work, for which nobody should be legally barred from harvesting the
commercial profits. However, in today's world, there is no guarantee
that a commercially successful product will not suddenly be challenged
in court by some obscure patent holder that nobody has ever heard of
before, or equally terrifying, by some large, hulking corporation that
has been collecting patents by the thousands, such as IBM.

There are so many patents out there nowadays that nobody who is
concerned with solving practical problems can keep track of whether a
given solution might potentially infringe with one or several of the
millions of patents. Compounding the problem is the awkward legal
language that is used in patents, which effectively encrypts the
patented "invention" and renders it incomprehensible to the ordinary
practitioner in a given field, making it unlikely that a simple patent
search will pick up all the patents that might be of danger. These
obscuration tactics, employed by patent attorneys probably
intentionally, of course defeat one of the key purposes of maintaining
a patent system at all. The patent system was intended to encourage
innovators to disclose their ideas to the public, so that the public
can learn from the improvements, in order to promote progress in
general. If the disclosures in patents can not be readily understood,
and are generally too trivial to bother with such that most knowledge
workers will rather just think about problems and solve them on their
own, then it is questionable whether the restrictions imposed by a
patent system should have to be endured as well.

As we will be heading closer towards the singularity, interesting
questions will arise regarding the use of machine intelligence,
otherwise called AI (Artifical Intelligence) software. It is becoming
increasingly the case that complex design efforts in engineering make
use of sophisticated CAD (Computer Aided Design) systems, that will
put in place a lot of the nitty-gritty details in complex designs. At
some point, it is anticipated that such systems will be able to come
up with a lot of little tricks that improve the implementation work.
At what point will such "machine inventions" infringe with existing
patents ? Who would be legally responsible for the infringement ?
The software company that supplied the program, or the engineering
company that ran it and thus caused these "inventions" to be
instantiated ? It is already the case today that some sophisticated
Genetic Programming systems, e.g. by John Koza, have come up with
higher quality designs for analog electronic circuitry than humans
generally would produce, and these systems also have re-invented and
outdone some actually patented designs. This is only the beginning of
a promising future of automated engineering tools, which could become
embroiled in legal controversy if the current deficiencies of the
patent system are not removed.

Quite a number of other objections can be raised against the patent
system. More material and references can be found at:
http://www.n-a-n-o.com/ipr/extro2/extro2mk.html.
It is worth pointing out here that the historical root for the concept
"Intellectual Property Right" is monopoly privilege and
censorship from the British Crown, which had nothing at all to
do with the goal of promoting the progress of society, which has at least
been the proclaimed pretext under which the U.S. system was
established. However, severe restrictions of people's liberty by
governments need to have a good justification to make worthwhile
maintaining. The patent system, when probed a bit, has had a mixed
track record at best. The government has not furnished the proof they
owe us of how the patent system conveys an overall benefit to society,
as has been
recently pointed out again elsewhere.

As a matter of fact, the patent system has a built-in conflict at the
core of its current design. Its stated goal is to promote progress,
which it tries to accomplish by inducing innovators to be creative and
to then share their ideas. This is in principle a valuable and noble
objective. However, the incentive that the patent system provides is
granting monopoly power to innovators who have disclosed their ideas. It
is of course clear that establishing monopoly powers does not promote
progress. Quite to the contrary. Monopoly is the tool to keep things
from changing, once the benefactor of the monopoly has established
itself. By building up such a contradictory and schizophrenic
incentive structure, the patent system has set itself up to cause a
lot of trouble, which has taken a while to unfold, but which is now
blossoming quite visibly. The take-home message is this: If the goal
of public policy making is to promote progress, it is not a good idea
to do so with incentives that in fact promote stagnation.

The spectrum of positions

The various parties can be roughly split up along these lines
according to their interest in the current patent system:

pro: patent attorneys and venture capitalists.
This represents the relatively small but very powerful elite that
stands to profit hugely by the current system. They maintain that
nobody would be interested in doing the work and investing in new
ideas, if they could then not be protected from competitors who would
just steal the ideas, without having had the development costs.

indifferent pragmatist.
Most entrepreneurs probably fall into this category. They worry about
a lot of things while getting a company up and running. Patent
protection is just one of the many tools available to build their
advantage in the market place. A trade-off decision needs to be made
for each resource utilized by the company, including investment in
patents. These people would likely adapt to a different patent
regime, by applying a different mix of strategies to get into the
market.

indifferent clueless.
This represents by far the largest segment of the population,
basically consumers, who buy products, but usually have no
understanding of what role patents played in getting the products out
to market. There is a general feeling out there that somehow, these
smart inventors "deserve" to get a special reward for their special
skills, and that the patent system serves this purpose. They tend to
not be aware of the distortions that exist today, and that most
patents by far are owned by large corporations and not by individual
inventors. In some sense, while this group carries the full load and
burden of patents in form of hidden legal costs that are factored into
the price of products they buy, they never notice this fact, because
this "patent tax" is hidden and usually spread out so thin that it is
only apparent when one is actively looking for it.

contra: idealists who fear slowdown of technological
progress. These are a still vanishingly small group of people who
are troubled with the way the current patent system is constructed,
and can even question its validity entirely. The arguments are
necessarily still of a theoretical nature, as one would have to
perform the experiment of establishing a technology-intense society
that functions just as well or better without a patent system.
However, some of the objections are so obvious and point out valid
structural defects in the current system, that it is only possible to
ignore them if one has a vested interest by being a member of the
first group.

Four Scenarios

Scenario 1 : Best, ideal world without any patents at all

Motto: "stand on each other's shoulders".

Every problem would be solved only once and then the solution
could be rapidly adopted throughout the world. A lot of
duplicative work could be saved if ideas could be shared more freely,
without the current restrictions. There clearly is a large oversupply of
problems in the world that need good and better solutions, such that it is
just ludicrously wasteful to not have those solutions that have been
worked out be utilized to the largest extent possible. This will
enable progress to proceed faster, and all of humanity is slated to
benefit from the more effective wealth creation.

To succeed in such a world, economic enterprises would have to adopt
the goal of constantly innovating, to have an advantage by obtaining some
headstart in new technology fields. They would have to get the best
people who are the most creative in their field, to have direct access
to the sometimes rare skills needed in a new field. Companies would
try to create an image of being a leader and innovator, instead of being
a me-too adopter and copy-cat. A current example of a company with
a leader image is SONY.

This kind of world would make it difficult for companies to survive
that would not be able to truly add some value and novelty, thereby
removing a lot of inefficient redundancies of second rate providers
that should better be doing something more uniquely useful. This
would create incentives to tackle a lot of new and as of yet unsolved
problems, leading to a lot of truly novel technology progress, as
every nook and cranny of the technology landscape will be explored
closely for new opportunities. There are enough important, difficult,
challenging, and lucrative problems that are already known, and even
more that we can not yet imagine, that we all will not run out of
useful work anytime soon.

Solutions to some problems are so desireable that some companies
will be happy to "sponsor" free-lance developers who work on such
problems, either under contract, or maybe even by publically held
contests or "auctions". While the resulting ideas generated by
solving the problems essentially become public domain and help the
world in general, the solution could have been sufficiently important
to the direct "sponsor" to make this approach fully worthwhile. Entire
industry consortia could act as "sponsors" to get certain
infrastructural issues worked out and implemented, such as new and
open networking standards. A number of independent collaborators
could work on such problems in an open source style of effort. The
"sponsors" might be hardware companies that will derive their prime
revenue from equipment sales, not from the software that is needed
nevertheless to make all this run smoothly.

This kind of development effort that is free from patent
restriction will provide a much clearer picture of where real problems
and difficulties lie in the world, and how much money viable solutions
would be worth, even if the solutions will be broadly used, including
by competitors (who might actually become part of temporary alliances
specifically for solving particular problems). The world could be
much better off if precious resources were really spent where
solutions count and advance the state of affairs substantially, to the
degree of making it worthwhile for "sponsors" of this kind. Another
important tool for companies to build a lead over competitors would
be in the use of trade secret, which already is very important in
industry today, and does not have the obnoxious properties so
characteristic of patents.

Scenario 2 : Worst possible world, with suffocating patent monopolies

Motto: "stand on each other's feet".

In this stuck in the mud world, very strong patent protection
would be instituted, which is broad and lasts extremely long. So let
us take a century, for sake of argument (the duration has been
gradually creeping up anyway). Entire subsectors of technology will
be dominated by a single company, which in effect has obtained a
government granted monopoly and stranglehold on the rate of innovation
in the subsector. Such monopoly holders can systematically block
start-up companies from developing improved products. The worst
scenario would have companies forbidding licensing of technology to
competitors outright. In a lesser scenario, the assessed licensing
fees would merely be sufficiently outrageously high to make competition
unattractive.

To have a chance at succeeding, most companies would have to work
their way around existing patent blockades. They would have to burn a
lot of energy and money to constantly re-invent various wheels. This
waste of resources and brain capital would slow down technological
progress in general.

However, the worst problem would not even be the slowdown of
incremental improvements made by competitors. Real breakthroughs that
open up entirely new territory become a lot harder too. In today's
world, and in the future even more so, new products and breakthroughs
require very interdisciplinary work, infringing patents in several
different domains at once. The overhead of bureaucracy could grow to
unacceptable levels. If each one of 12 different patent holders would
want 10% royalties off your product, it will become economically
infeasible to do business on this basis.

Strong and legally granted monopoly power will place everybody at
the mercy of what some large companies might want to do. For example,
an IBM could systematically hinder progress towards nanotechnology, if
they first want to milk their silicon technology to the max. Or, in a
different play, they could just do nanotechnology all by themselves,
not allowing anybody else to participate. At this point, they would
essentially own the world.

Sadly (or ironically), the general introduction of friction and the
slowdown of progress brought about by a very extensive and tough
patent system designed to "protect" the interests of innovators would
have exactly the opposite effect of its stated goal, which was to
promote progress.

The following two scenarios are someplace in between the two extremes
above, and maybe represent realistically acceptable and implementable compromises.

Scenario 3 : Mellowed out and tamed patent system

If one would retain a fairly conventional patent system, but would
improve it in certain ways, it might be possible to arrive at an
acceptable compromise that removes the worst side effects of the
current system.

One of the key improvements necessary would have to be the strict
application of utility and especially novelty criteria, to weed out
most of the bogus triviality that the patent office is being spammed
with. Realistically speaking, certainly no more than about one tenth
of the current patents should have been issued, if even that much.
The patent office's filtering criteria would have to be improved to
this kind of stringency. The current patent office sees its job as
more like "granting patents when asked for them" as opposed to doing
serious quality control. This probably could be achieved if the 10%
most qualified patent examiners would be retained, and the rest fired.

The other key improvement would of course have to be a significant
reduction of the protection time granted to patents. The current two
decades are way out of line compared to progress in certain fields
like software. Twenty years ago, Microsoft basically did not even
really exist, let alone the WWW. In just these few years, less than
the duration time of a patent, many different generations of software
technology were developed, brought to market, earned their share, and
become obsolete. With such rapid innovation cycle times, software
business is geared towards recovering development costs and towards
earning a profit in a much shorter time span than a patent grants.
And so patent protection for new features introduced does not truly
make sense in the software business model. Primarily the harmful
effects are noticeable by all the other players who also need to
develop at a rapid pace.

A reasonable time for patent protection in today's fast moving
world might be 3 years. But even better would be establishing an
adaptive system that would need to monitor the rate of product
obsolescence and the like, to determine and constantly adjust the
protection time to the shorter values commensurate with the general
innovation rate, as we head into the singularity.

Scenario 4 : Slightly different take, akin to an "innovation tax"

The stated prime goal of the patent system was to encourage
innovation and the dissemination of the innovations, by establishing a
mechanism for the innovator to recover the upfront cost of performing
the necessary research, and to earn a living.

So what if the system were changed to grant an innovator the right
to collect licensing fees in a patent manner, until the development
costs have been fully recovered and amortized, plus an additional
allowance for a 50% profit (or whatever the number may be) ? After
the amortization and profit, the patent would automatically become
public domain.

When filing a patent, the innovator would need to declare and
document in detail the incurred development costs, much like it has to
be done in a tax return. These claims could be subject to challenges,
if they sound unreasonable, similar to what the IRS can do. Probably
these cost claims should even be published along with the patent. In
terms of licensing, the patent holder would have to license to other
interested parties. In other words, government granted exclusive
monopolies would no longer be possible. However, in terms of
licensing fees, a lot of freedom could be granted to the patent
holder, because the sole requirement is that a fixed, predetermined
amount can be collected, sum total. Whether the fees are extremely
high (but thus lasting only for a short time), or very low for an
extended period of time, does not really matter much. In the first
case, a party or consortium that is really interested in using the
invention could just choose to "buy out" this patent, effectively
liberating it for the rest of eternity. In the second case, the
licensing fees would not be particularly bothersome, because they are
just so low, and might even stop completely at some point. However,
it would be necessary to make sure that free software still could be
written and distributed. In other words, at least that category would
be exempt from such fees.

Such a system would remove a stodgy fixation on a given time frame
of protection, and instead focus on what the real object should be,
namely to allow the innovator to recover the costs incurred for being
so generous to publish the invention. By requiring documentation of
the costs incurred, this solves the problem of trivial patents as
well. They still could be filed and granted, but in all likelyhood,
it would be very difficult to argue for high development costs for
trivial ideas. The challenge mechanism, which should be open to
public criticism as well, would destroy the hope to get away with
something like that. If trivial patents can only prove that $100
were needed to come up with the idea, they will become unattractive in
short order. Or maybe even a cottage industry of valid
micro-innovation that thrives on such smallish claims might spring up,
which might even fill a useful niche in the economy.

This kind of a system might actually even work for the copyright
system as well, which currently also suffers from some severe
imbalances that could be corrected with this kind of "fair"
compensation method for the benefit of innovators and society alike.

Acknowledgments

I would like to thank Tom Palmer, who has influenced me
substantially through his writings on the topic of intellectual
property "rights". I would also like to thank RMS (Richard Stallman),
who was an early pioneer in advocating that at least software should
be made exempt from patenting. The League for Programming Freedom was
founded to pursue this initiative.

Bureaucratic formalities

This article is (c) copyrighted 2000, which means that you are
explicitly in possession of the right to make as many copies of it as
you like, in any medium you desire, provided you copy it in its
entirety, including this notice. Quoting from the article is also
allowed if it is not mis-represented out of context, and if proper
attribution and detailed information concerning the source is
included, which will easily enable the retrieval of this full text.

If you believe that the issue of retaining personal freedom and
straightening out the current "Intellectual Property Right" situation
is important, I urge you to distribute this article to as many other
human beings as possible, and to consider sending a donation of any
kind, size, or smallness, to enable the writing of additional articles
and further action. All of this work has been done in the little spare
time I have been able to scratch together. Donations can be sent to:

Markus Krummenacker
P.O. Box 1073
Los Altos CA 94023-1073
USA
I will also happily accept donations of any size through PayPal, at the eddress below.
Comments, corrections, and other suggestions are welcome and can
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